Market Liquidity and Performance Monitoring

Dados Bibliográficos

ID10175366
AutoresBengt Holmström, Jean Tirole
Ano1993
Volume101
Fascículo4
Páginas678-709
Data de publicação1993-08-01
Peer ReviewedSim
Open AccessNão
TipoARTICLE
PeriódicoJournal of Political Economy (JOURNAL)
Identificadores do periódicoISSN: 0022-3808 • E-ISSN: 1537-534X
EditoraUniversity of Chicago Press (PUBLISHER • US)
DOI10.1086/261893
OpenAlexW2024623582
IdiomaEN
Citações recebidas40
Referências citadas8

This paper shows that the stock price incorporates performance information that cannot be extracted from the firm's current or future profit data. The additional information is useful for structuring managerial incentives. The amount of information contained in the stock price depends on the liquidity of the market. Concentrated ownership, by reducing market liquidity, reduces the benefits of market monitoring. Integration is associated with weakened managerial incentives and less market monitoring. The paper also studies the equilibrium size of the stock market as a function of investor preferences and the available amounts of long- and short-term capital. Copyright 1993 by University of Chicago Press

Business · Capital market · Capital market line · Economics · Enterprise value · Financial economics · Incentive · Liquidity crisis · Market depth · Market liquidity · Market maker · Market value added · Microeconomics · Monetary economics · Private information retrieval · Stock market · Corporate Finance and Governance · Finance · Financial Markets and Investment Strategies · Financial Reporting and Valuation Research